Alternative Compensation Plans

ADM, Inc., an electronics manufacturer, uses growth in earnings per share (EPS) as a guideline for evaluating executive performance. ADM executives receive a bonus of $5,000 for every penny increase in EPS for the year. This bonus is paid in addition to fixed salaries ranging from $500,000 to $900,000 annually.
Cygnus Corporation, a computer components manufacturer, also uses EPS as an evaluation tool. Its executives receive a bonus equal to 40% of their salary for the year if the firm’s EPS is in the top third of a list ranking the EPS for Cygnus and its 12 competitors.

In your opinion what is the greatest weaknesses of an incentive plan?

Use a minimum of one outside source in addition to you text and the above scenario to construct your response. Write in complete sentences and use appropriate APA citations as necessary.

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